Oil Down, Gas Up
Last Thursday the crude oil prices reached its lowest levels of the year. And yet, gas prices in Central Texas are creeping back to near two-dollars a gallon. If oil is cheaper, why is gas getting more expensive?
Ehud Ronn is Director of the Center for Energy Finance at the McCombs School. He said the price difference between crude oil and refined gas has slipped in favor of gas by about 15 dollars at the refinery level.
“So basically what you’ve had is that the refining spread has gone from negative to positive and that will cause prices at the pump to go up, Ronn said”
In November, domestic competition drew the refining spread to an abnormally low level, bringing gas prices with them. That had an unexpected affect on the refineries.
Ronn again: “If you think about it, what that means is that refiners actually lose money on every barrel they refine.”
Now Ronn says that trend has now stabilized and reversed. But while he sees a potential drop in gas prices over the long term, not everyone agrees. John Hockenyos is president of an economic analysis firm in Austin. He says there are other facts to considerate.
“I think the drop in crude prices is relatively temporary. I think you’ll see those go back up, cause I’ think, if nothing else, OPEC will cut the production further to help stabilize the price.”
Hockenyos estimated the stabilized gas prices to land somewhere between two dollars and two dollars and fifty cents a gallon in near future.
After a week long price slide, oil prices were soaring 10 percent on Friday.